Payment systems in Tanzania - Bank for International Settlements

- 202 - Tanzania
3. PRESENT INTERBANK EXCHANGE AND SETTLEMENT
3.1 General overview
Generally, all interbank payments are first cleared between banks locally, usually through
either bilateral agreements12 or a local clearing house, before being cleared and settled between
non-local branches of the same bank via intra-bank clearing mechanism.
Practically, the interbank clearing can be grouped into two separate major sub-systems:
local clearings - within clearing house localities and non-local clearance - between up-country13 branches (where there is no clearing house).
Dar Es Salaam Bankers Clearing House (DBCH) was established in July 1993. It was the
first clearing house in the country, with the objective of, amongst others, making arrangements for the
speedy and economic collection of cheques, bills and other documents payable or deliverable at or
through the offices of the members of the clearing house. It has a comprehensive set of rules which
adequately describe the procedures for clearing cheques throughout the country in equitable terms.
Later two more clearing houses were established, in 1996 and 1997 respectively. All are bound by the
same rules as for the DBCH. All clearing processes in clearing houses are manual.
Within the city or town where a clearing house is situated, the rules provide for an
exchange of cheques each morning at the clearing house. These facilities are located in the Bank of
Tanzania premises. The rules allow 3 days clearing in the cities and a maximum of 28 days for remote
clearing. Settlement is on multilateral net basis over banks’ current accounts at the Bank of Tanzania
at the end of day.
There has been a general decline in use of DBCH in terms of average daily number of
cheques being cleared. On the other hand, the total value of all cheques being cleared each day, on
average, has been increasing modestly, as has the average value per cheque. The net settlement, on
average, reduces by about 56% the total value being netted. In these cases the concentration of
deposits of one bank is not as large as those controlled by the biggest bank in the country.
3.2 Structure, operation and administration
3.2.1 Major legislation, regulation and policies
There is no specific legislative framework governing the operations of the Tanzania
payment systems in general nor is there legislation for clearing and/or interbank settlement.
The instruments mostly handled through the clearing houses are cheques, drafts, mail
transfers and other bills of exchange. They are subject to the provisions of the Bills of Exchange
Ordinance, 1882 and the Tanzania Cheques Act, 1969.
The operations of all interbank clearings are subject to regulations and rules set by
members, through the Tanzania Bankers Association and the Bank of Tanzania. Membership of the
clearing houses is open to any bank which, in the opinion of the Bank of Tanzania, is eligible for
membership and agrees to the regulations and rules governing the operations of the clearing house.
The administrative body of the clearing houses is the Committee of Management
consisting of the Governor or Deputy Governor of the Bank of Tanzania (ex-officio chairman) and all
the managing directors of commercial banks who are members of the clearing houses.
12 In regional towns where there is no clearing house, banks have designated branches where they meet to exchange
instruments bilaterally.
13 Up-country for this purpose means remote parts of the country, i.e. away from clearing house localities.